Frontier Digital Ventures Ltd

ASX:FDV

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Hi, everyone. Thanks for standing by, and welcome to the Frontier Digital Ventures Half Year 2024 Results Briefing.

I would now like to hand over to Shaun Di Gregorio, Founder and CEO, to begin the results briefing.

[Shaun Di Gregorio, executive]

Thanks, Jerry. I hope everyone can hear me okay. Thanks for joining us today or this afternoon for our half year. As you know, we release quarterly updates, much of which we -- obviously in market, so many people will know the results.

Today, we released our statutory results, which include far more granularity and information about the business, and we'll run through much of that today over the next 30 minutes or so. We'll try and get through, Jerry, I think presentation in about 20 minutes. And then if people have questions, we'll allow another 10 minutes or so for those questions toward the end. So I'll let you moderate those.

Just to remind people a little bit about our group, we do online marketplace classifieds in emerging markets. Many of you will be familiar with our model. We are a smaller version of somewhat bigger entities that have been very profitable over the [ gen AI ] of feature our business. We're located across our 3 regions. We're market leaders. And as I said, those regions are all covering emerging markets.

The model, and we'll unpack this in a little more detail in the day, is around establishing online classifieds businesses, but then really using those online classifieds ecosystems to build out revenue opportunities that relate to full transactions. Big focus on property, secondary focus on the automotive vertical, but a very prudent model and a very well-known model for most people.

In terms of our results, I will go straight to the half year. So we continue to grow our revenue. As you can see on the screen, we've had a fairly healthy trajectory from when we listed to now. If we go back to when we listed in the latter half of '16, so the fiscal year we reported was 2017, revenue just over $9 million on an EBITDA loss of $7 million.

And we're now, if you look at our first half, almost $42 million in revenue and a significant improvement in EBITDA as well. So part of our story has always been consistency. Part of our story has always been making sure that our long-term trajectory is on track. We've achieved that organically, which is critical in our business model, and we continue to achieve our growth over the last 12 months exclusively organically.

Over time, we've acquired businesses. You can see our back half of 2020 into '21, we've made some acquisitions. So they obviously help that overall growth picture. But if you want to take our first half at, say, $42 million, a good improvement on the corresponding period last year. And as you can see, if you want to do the math and sort of double it a bit, you'll get a sense of how we're looking on a full year basis.

We managed to increase our EBITDA, and I'll dive into a little more detail on that in the future slides, but healthy increase in EBITDA. We are, as I've said in these briefings before, focused on continuing our growth trajectory, our revenue growth trajectory. We've got all of our businesses to profitability now. So it's finding a balance between continuing to grow revenue whilst continuing to improve our operating margins at the same time. So we've achieved that goal in the first half of the year. The second quarter is much healthier than the first quarter. We had a pretty tough first quarter, but all of our businesses have improved quarter 2 versus quarter 1.

So the half itself, obviously, look better than the corresponding period. So really strong half. The operating conditions moreover continue to look better on the horizon. If we look forward to what will be rate cuts from the Fed reserve, albeit maybe slightly as we get into the back half and towards the end of the year into next, we think that the operating environment will continue to get better, the cost of capital comes down.

Obviously, interest rates, when you're in the business of helping people find homes and find cars online, are really critical part of the mix that drives commercial transaction volume. So when interest rates are high, those volumes reduce. Even in sort of high interest rate periods, we're growing our revenue, we've improved our operating margins. So I think that goes to the strength of the model.

If you can run a model like we do and in periods in emerging markets where interest rates were very high, where inflation was high, all of those big macro markets are now coming down, we have managed to continue to grow our business successfully and improved our profitability during what are fairly tough trading conditions. And we'll go in and look at a number of the regions in more detail.

Just as a bit of a snapshot so you understand the statutory accounts. We take out our consolidated revenues and then our share of our Associates, so you get to the end revenue number. And the math works the same way on our EBITDA. So continued revenue growth both at the statutory level and then including our operating revenue from Associates.

We saw, for example, Zameen, in Q2, growth the first time year-on-year since that economy hit some headwinds last year. Our other business in Pakistan, PakWheels, continued to grow throughout. So positive signs coming out of our Associates. But overall, strong growth on the revenue in conditions that were pretty tough, and we've improved our EBITDA margin. Again, one of our key goals is to continue to grow while maintaining that profitability.

Our regions are operating cash flow positive, and we continue to have cash in the bank. But the headline numbers for us are continued growth. It's obviously a record result, goes without saying because we've grown all of the time. But strong growth on the revenue piece, continued expansion of the EBITDA margin. And again, getting the balance of growth and our profitability right is what we're doing at the moment. And a big part of that is our product road map, and that's driving a lot of the new revenue growth in each of our 3 key regions.

Just to break down the revenues so people understand it a bit better. As I said, we have our statutory, which is the consolidated piece, and then we have revenue from Associates. So that gets us to that total number. I'll dive into the regions in a little more detail in a moment, but I guess the important thing is that continued trajectory in markets, as I said, where we have faced pretty high interest rates and pretty high inflation over the last 18 months to 2 years.

We have continued the growth story of the business. So I think that, that just goes to the underlying model. It goes to our ability to get not just the underlying model to continue to grow, but also get new products to market. And when we get new products to market, that really plays to the narrative we have spoken of at length over the last little while about our product road map, about the opportunities that exist in these markets and the opportunities that we're actually now managing to monetize. So monetizing new products in these markets over the last 6 to 12 months has been a feature of our growth.

When we look at our expenses, they've grown slower, hence, the increase in our margin. But again, we're just walking this fine line of getting the balance of revenue growth and getting the balance of maintaining our EBITDA whilst investing in the continued growth of the businesses. And I think if you can do that at the moment, put yourself in a really good position as you look toward the rest of the year and into next. I think for a lot of businesses over the last 12 to 18 months, it's been making sure that they've built really robust businesses, that they've got their cost growth under control and they're really focused on revenue growth. And we're starting to see the benefit of that flow through, particularly in Q2, and that's driven a really strong H1 result for us given what's going on around us.

When you look at the margin, again, all of our regions are profitable. We saw good growth in LATAM particularly, and that's driven that overall result. And we saw continued steadiness, I guess, in the EBITDA from Associates, which is those investments in the businesses in Pakistan that we have. And I guess our -- the encouraging thing for us is when we look into Pakistan, and people have a big focus on that historically, we've seen inflation and interest rates halved since last year. So those pointers continue to go in the right direction and continued confidence in that market.

So it's been a lot of hard work culminating to this half year result in operating conditions that continue to be interesting and pose challenges. But as I said, we've got our core businesses going along well. We've got new products getting into market. We're starting to see that consistent revenue growth, but underpinned by consistent EBITDA performance. And that's what we want to make sure we continue to deliver is that strong EBITDA profile, so people continue to recognize and understand the model as it scales. Today's profit, based on the operating cash performance of the 3 regions, continues to be operating cash flow positive as well.

We have continued to invest in new products. That was a big feature at the first half of the year. We released new platforms in South America. We released new products right across the group. I mean it's important when you're running these businesses that you do actually continue to think about your platforms and your products because that's where you get scale and growth into the future. And if we can invest a bit of cash into those platforms and products, we know that the payoff is significant. And there's really strong evidence in a number of the new products that have gone to market in the first half of the year that have helped us with that growth trajectory.

I won't stop on this slide too long, it's a bit technical, but it simply seeks to explain the accounts for people who are perhaps new to it. As I said, this is the statutory version. This includes the businesses that we consolidate and it picks up the EBITDA piece from our Associates. There's a whole lot of stuff below the line, which gets explained in these accounts. But I guess if you look out in the markets and the improvements in the far-right column, you can see that everything that we wanted to improve upon that we have control of, we've done that in this period.

So a big reduction in the bottom line in terms of the loss, that was last year, improvements in revenue and improvements in EBITDA margin. And these are the really important things, I guess, for people to understand. The D&A charges rather relate to a lot of the CapEx and the brand work or the work that was done on the platforms. There's a little bit of hangover from some of the acquisitions we made that were asset-based that continue to be amortized.

So that number will slowly come down, but it's a function of some of the accounting treatment that we've had historically in the past. But the big improvements for us is our revenue growth in markets that were tricky to navigate. We have improved our operating margin. And every other key metric that we look at on a P&L basis has improved significantly since this time last year. So we're pretty pleased with that.

And when we look at the regions, and this is probably where it gets more interesting for folks, is just to look at LATAM, for example, so good strong half in LATAM, 4 businesses there. Whenever you operate a portfolio, you always get a few really good ones. There's always one that's a bit of a [ studying issue ]. But in this case, we've had really good growth in a couple of the businesses we incur. And InfoCasas, these are property portals in Latin America. E24, which is in Central America, that traded reasonably well, probably a little bit below expectations. Yapo was the one where we did a lot of work in the first half year replacing the platform. So brand-new platform was rolled out for Yapo on July 1. So we certainly expect better performance from that business, and that will help the overall picture.

I think the interesting thing in this part of the world also is just the mix in revenues, so now at a fairly good mix of where the revenue has come from. There's still the strength of that reoccurring revenue, which is really valuable, and that's essentially half of the revenue. The traditional sources of revenue you get in these businesses around advertising and media make up a fair chunk as well, but we're now getting a substantial amount of revenue from our new product lines and from the activities that we have around transactions. And that's helping people go right through the search and discover phase and obviously complete transactions.

A couple of new products, Iris and Centrify, which we've highlighted in previous updates to the market, continue to be really strong contributors in this part of the world, and we've improved their margin as well. We did a lot of investment in the products in LATAM in the first half of the year. As I mentioned, that really was focused on releasing a new product for -- a new platform, rather, for Yapo. And we also improved the product set that we have at Fincaraíz in the first half of the year as well.

So those initiatives, those investments in the platform, in the tech and the product will continue. We see that as really critical in terms of driving the longer-term growth, but a really strong half for the business where they've grown their revenue, they've improved their margin, and they've got a really good spread when it comes to the revenue mix. So good signs coming out of this part of the world and well on track, and we look forward to this business continuing to grow over the ensuing periods.

When we look at MENA, pretty tough trading conditions, although we sort of managed to hold out revenue. A lot of work being done in this part of the world as far as the main business, which is Avito, which actually had a reasonable growth, as do Moteur, was probably offset by a couple of the businesses in that portfolio, which performed below expectations and maybe made the bigger picture look as it does. But certainly, the core businesses, the larger businesses there, which are based out of Morocco, both grew period-on-period and both improved their profitability.

We had some -- we've got some work to do in 1 or 2 others there, being Tayara and PropertyPro, which we're looking at pretty closely and, I think, we'll have to conclude what we want to do with those businesses in the near term because they're probably holding this region back. But this region really starting now to get a bit better traction in Q3 as well. So a much better Q3 or start to Q3 than we had in Q1 and Q2. So year-on-year, these businesses or this region is certainly looking better in Q3, but held our ground in, I guess, what were fairly tough trading conditions.

Situation, I guess, the consolidated piece of Asia was we had good revenue growth, and that was underpinned by a couple of the businesses there. A couple of the businesses there, AutoDeal or Hoppler, probably impacted our EBITDA. But again, we're just focused on trying to scale up this part of the world. It's a relatively modest amount of revenue, but we think that it can be much larger. And the effort really is getting a balance between growing the revenue, which had fairly good growth period-on-period, making sure we get the mix of revenue right, but also continuing to maintain profitability, which we did.

So this is a growth first, do it profitably, but do it as fast as you can mandate. So good growth in some of the businesses. Again, there's always 1 or 2 in the portfolio that make life interesting, but I think we're fairly pleased with the top line, want to get the mix of revenue right and really take advantage of some of the opportunities that are there whilst continuing to be profitable, which we did. And we've just broken out that profitability so people understand it a bit better.

When we look into Pakistan, so Q2 was a really interesting story. So whilst the full year, when you look at the half, was slightly off, what we saw in Q2 was Zameen growth for the first time, as I mentioned, quarter-on-quarter. So Q2 is much better than Q1. So that's really encouraging. The big macro markets in Pakistan have improved significantly, particularly in the last 3 to 6 months. We've seen inflation and, consequently, interest rates reduced significantly. Inflation is now less than half what it was a year ago, and interest rates are following.

So there's far more confidence starting to emerge. This will be a slow and steady improvement. The businesses have maintained their profitability throughout. So that gives them a really good foundation to now start to grow again. So we saw quarter-on-quarter growth into mainly Q2. Obviously, Q1 was a bit soft, but that was coming off the longer-term trend.

Encouragingly, PakWheels have continued to grow throughout. And you can see that the mix of revenue is slightly different again than the other regions. But what we wanted to get through here is returning to here period-on-period growth with Zameen in Q2, which we did. So that bodes well for the rest of the year. They've maintained margin and maintained cash flows throughout, and that was through probably the most difficult period that this particular market has gone through in recent memory.

But again, signs are much more positive now. I think if I've done this briefing a year ago, it was really tough, to be frank, but in a much better position now to see these businesses return to growth. So while that half on year half top line was a bit softer, quarter-on-quarter picture was much better. And we look forward to these businesses returning some really positive results in the back half of the year and into next.

So walked through what has been a fairly torrid time in Pakistan now coming out the other end. And all of the big macro markets, the interest rates or inflation into interest rates have increased significantly, the balance of payments have improved. So much more confidence starting to return to the market. Interestingly, the stock market in Pakistan has gone absolutely nuts, but we're now seeing consumer spending into particularly how does this start to improve, our transaction volume is holding up and the core business there has held up reasonably well for Zameen as well.

So much more confidence now this business having grown in Q2 and again started Q3 fairly positively as well. So we think that's certainly through the worst of it, a lot of upside now in how we view this. So I guess the way we view Zameen and PakWheels is that it's all upside from here in. So we think that this is going to be a good contributor again for the overall group as we are heading to the back half of this year and into next.

In terms of with some progress markers that we put to the market earlier on in the year, we said our key goals were our revenue growth, our margin, our product road map and creating value for our investors. And just to sort of go back and mark ourselves against what we put out there as far as the objectives that we had and the priorities that we had for 2024, we've continued our revenue growth. That's a big priority for us, and we'll continue to invest in ways of ensuring that we will grow.

And it sort of goes to the product development and the product road map, big focus on that internally, and that takes up a lot of our discussions in how we not only release products into markets that we operate, but how we then take those products into other countries or adjacent countries or markets, but then how you can take some of those products and that operation experience in launching a new product in one country, for example, or one region into other countries or into other regions. And that's a big focus for us as we get into the back half of the year.

Lots of proof of concept in the first half, replacing platforms, improving some of the tech, improving some of the product ranges that we have in many of the businesses. And then thinking about now how do we take the success of those businesses not only to other countries, but into other regions. So this is very much the playbook as we head into the latter half of '24. We've increased our operating margin.

So that's -- whilst people might say it's 2%, if we can do that frequently and regularly and improve the rate of margin expansion, it will put us in a really good sign, and that will come from getting the other 2 elements of what I just discussed really right. And that's nailing the revenue piece, which is underpinned by a really clear product road map and investment in that product road map and, of course, margin expansion follows. So we're now at a really interesting point where we've, at an EBITDA level, demonstrated continued profitability. We now want to make sure we're very focused on revenue growth, and we know that will come from great clarity around the product road map.

And now the one on the right side, it's probably of most interest to people on this call, is value for investors. Obviously, our share price, we feel, is not reflective of the performance of the business. There might be a whole range of reasons for that. But suffice to say, we think if we continue to innovate, we continue to drive our revenue growth, but more importantly, we continue to demonstrate the margin expansion that can come from getting those things right, that value in the market will be demonstrated through the share price over time.

And as the largest shareholder in the company, I guess everyone on the call can take it from me that I'm pretty aligned to that outcome, but it's one that we're very focused on. But we know that getting the operating parts of the business nailed on those 3 priorities that we identified at the beginning of the year and we're sort of reporting back on will have a really large impact on the value. So looking for those to continue those really key markets as far as the priority is concerned.

But we recognize that we think we're undervalued. And we look at some of the transactions that have taken place recently, whether that's PropertyGuru being privatized at multiples that far exceed ours, and ironically, that business was growing slower and burning a ton of cash. So we're working really hard to make sure we get our fundamentals right, the key financial markets right. We know what drives value in these businesses, and that's largely the product road map. And we know that share price will take care of itself if we continue to get those things right.

We've put a whole bunch of information in this set, which people will be familiar with. If you're the first time on these calls, just to remind people the regions in which we operate and where we are market leaders. There's information about our business model for people to continue to understand, which essentially is predicated on the classifieds modeling to ancillary opportunities around the value that's generated when a house or a car is transacted.

So if you look at the ancillary box there, that's where a lot of our focus is at the minute. And that's not just old-fashioned kind of sell people mortgages or [ sell a labor ], it's innovative products to help people buy and sell property and cars, but also continuing to really push those ancillary products much closer to the transaction and ensuring that transactions occur through our platforms.

The opportunity is pretty big, we know that, and I'll leave people to ponder that. In the back of the deck, there is some additional information, which I won't stop on, but it does pull apart all of the regions so you can see the performance metrics on each individual business. And of course, the statutory accounts were released today, so people can dive into those, which, by definition, provide people with a whole lot more granularity, yes, I think to each business and, obviously, the P&L, the balance sheet and cash flows.

So Jerry, I'll stop there and happy to defer to questions or if you think that we need to direct people on the call to any particular part of the presentation that I might have missed, I'm happy to take direction on that as well.

[Operator]

[Operator Instructions] Our first question from the Q&A is, how should we think about the margin trajectory for InfoCasas going forward?

[Shaun Di Gregorio, executive]

InfoCasas specifically?

[Operator]

Yes.

[Shaun Di Gregorio, executive]

So that's a business that forms part of our 360 LATAM group. It's a business that is actually pretty core just given its size. It's a business into which we do a lot of new product releases from. So the new product releases tend to get trialed and tested out of InfoCasas. It's where our tech development is at its greatest in that region. So new products typically start with poor margins and then grow better margins over time.

So InfoCasas is profitable. It's probably the most profitable if you like it to be, but it's probably there because we tend to release a lot of new products through that business. So early-stage new products tend to be low margin and grow margin over time as you get scale and sustainability. So we -- a number of our businesses are in probably double-digit sort of EBITDA territory. It's very much where we think InfoCasas will go. But it does serve as a bit of a test bed as well. So it benefits from those new products or at least them coming out of the development center there, which probably depresses the margin a little bit because they tend to be low margin early on and get better over time.

But we want InfoCasas to look like every other successful property vertical and have strong double-digit EBITDA margins over time, and there's probably a lot of our businesses, too. I think when you look at the consolidated level, it's only gone up by a couple of percentage points. Interestingly, if you took away corporate cost, for example, and just looked at the businesses individually, which is tabled in the back of the deck, you see a much clearer sort of margin examination of the businesses. And yes, we want them all to be, like I've always said to people in the past, double-digit strong high-margin businesses.

[Operator]

Our next question is, how should we think about CapEx spend from here, particularly in light of the 360 LATAM medium-term strategy?

[Shaun Di Gregorio, executive]

Yes. So CapEx is a delicate balance where we're operating the businesses cash flow positive at an operating level. We do need to invest in product, and our goal is to grow, it's to be profitable, continuing to be operating cash flow positive, but invest in product development. So there will be continued CapEx, that's the nature of what we do. But we're trying to get the balance right between how much to invest in CapEx versus the outcomes. And it is about developing products that can help move consumers from search and discover through to transactions, and there's some really good examples of those.

But there'll be continued CapEx. We need to invest in the products, and that's where the CapEx tends to go. And we've got some really good examples of new products that have benefited from that CapEx spend. The biggest CapEx spend we've had over the last sort of 8 months in the products were in the platform -- in the new platform of Yapo. And that's a legacy which we had to improve. We also spent -- resourced our CapEx into the platform for Fincaraíz in Colombia as well. It's had a tremendous period of stand-alone as a business.

But the CapEx into product development is key in scaling these businesses. And what you want to do is get really good core businesses, which are the classifieds, so you want to put prices up and you want to build margin. But then you've got to make sure that your CapEx is not excessive and is funded and is sustainable, but you do need to invest in those things. It's the nature of the types of businesses we make.

[Operator]

The next question is in relation to Yapo. Yapo has seemed to have declined in revenue on PCP. Is this driven by the replatforming? And is there confidence that the revenue growth will be restored once the new platform is bedded down and launched?

[Shaun Di Gregorio, executive]

Yes, there is confidence, and that was the whole point of doing the platform. It was -- for those who perhaps operate or are familiar with, the technical aspect of these businesses is that the platforms become -- if -- when you build a platform, historically, what tends to happen is you add to it, you add new product, you add new functions, you add new features. And over a long period of time, that can sometimes accumulate technical debt because not all of those functions and features necessarily were designed to exist when the platform was coded originally. So you end up with very -- you make it slower and you make it more cumbersome.

And what we ran into with Yapo is a long-term accumulation of that technical debt, which meant that we couldn't really do much to the site. We couldn't get it to add new product. It slowed down. It was getting clunky around the uploading of properties. It was getting clunky around users being able to get leads through the sellers. It's been clunky from sellers being able to access those leads.

So that has now all been rectified with the new platform. And had we not done it, the trend of making if -- the difficulty in that business would have continued. But the whole point of that to invest that CapEx was to rebuild the platform. So it had -- it was able to scale, right? So that's at least -- these platforms have to be able to scale. And if they can't scale, I think they sort of slowly die, and that's what would have happened with Yapo. It's what happens in any of these sites if you don't invest in them over time.

So -- but Yapo was a bit of an outlier. It was a bit of an extremity on that. The technical debt was large and we had to repair it, and we did. We started that sort of late last year. So we absolutely invested that money on the basis that the business will improve, and that's very much part of that plan and the rationale for the investment.

[Operator]

We have another question regarding the update on the sale of Zameen by the major shareholder and whether there's been any update?

[Shaun Di Gregorio, executive]

Look, so I think I've got asked this question last month, and that's the same. The intent was there before the market became difficult. The business is recovering. And I think everyone is simply focused on the business recovering, and it's now growing year-on-year, as I said. For the first time in a while, it's profitable, it generates cash. So the fundamentals of the business are steady, stabilized and now it's a function of the business growing and revisiting that -- the potential sale of it, for example, as the business improves.

But I don't -- the ambition hasn't changed. It's simply that the business changed, underlying that ambition, but the business is now improving again, which is great. So that ambition remains. It's probably just had the pause button here until we see, I guess, consistent recovery in the business, which is now being evidenced by the financial data that we're getting.

[Operator]

Further more on Zameen, we have a question regarding, if you could please elaborate on the quarter-on-quarter improvement mentioned in the first half of 2024 and what your general outlook for Zameen is?

[Shaun Di Gregorio, executive]

Yes. So if you go back to what we released to the market at the end of July, they'll have that quarter-on-quarter detail, which I won't sort of swap screens and try and access now. But Q2, year-over-year growth for the first time in a couple of years. So you can actually access that on the ASX, just going back and looking what we released in July.

We have always been really cautious about sort of forward guidance on Zameen. But the fact that it grew pretty good in July, so we don't -- we only look at the data in hand, and that's what's presented in the quarterly that was released at the end of July. So people can go and dive into that to get the absolute numbers. But where you should appreciate, cautious about providing forward guidance. But what we can point to is the continued improvement that we see in the last little period of time. And as I said, that's available on the release we did at the end of July.

[Operator]

We have a question on Fincaraíz regarding how there was a price rise during first half 2024. The question is, roughly how much did prices rise overall? And did they get the full benefit of that during the half?

[Shaun Di Gregorio, executive]

No. We never get that full benefit immediately only because you've got a lot of subscription-based customers, so it comes up over time. The price rise from memory was around 15%, but don't write that down and quote it back at me next time we talk. I don't have that absolute number in hand. But the price rise was done earlier in the year with an improved platform, so you're going to get a bit of growth from better products rollout to customers. But price rises generally flow through over time. There are always a bit of a lag effect on the financials and -- but they did do a price rise in the first half of the year.

[Operator]

The next question is, during the first half results, the other receivables items in the balance sheet grew by roughly $4 million. Could you possibly share and elaborate on what the other receivables items are?

[Shaun Di Gregorio, executive]

Yes. So that is -- it was actually at the request of our auditors. So there are some -- historically, we've had internal loans, which has just been a way of funding companies which we already own. But these sort of loans go back some period of time, all of which then get converted to equity. Those loans are then shown as receivables in the first half, which will disappear in the second half.

So it's a technical accounting treatment. I know it appears as a bit of an oddity or an outlier, but it's literally the accumulation of loans that are not yet converted to equity over time that will be done so internally. But at the auditor's insistence, they were presented as receivables because they're technically loans. But these go back to funding of companies over a prolonged period of time, LATAM, Asia, et cetera, which they just can get converted if given the ownership structure.

So it's a bit of a red herring in that sense, but that will effectively turn to 0 in the second half once the completion of the equity is done. So that's an accounting treatment, which appears a bit of an oddity when you see it just cold as a number. But that's the origin of the number.

[Operator]

Our next question is, what does the contribution to margin from Centrify and Iris look like at the moment for 360 LATAM?

[Shaun Di Gregorio, executive]

Yes. We don't necessarily publish that granularity of details on ASX announcement by sort of product line margin; we will over time. But suffice to say they both contribute positively. But they're early-stage products, they're growing rapidly and they have a positive contribution. It's not a lot at the moment. But the point of the new product is to get scale, and over time with scale, you build margins. So they're very much in that very typical sort of product road map, release product, get traction, get uptake, get success, build margins. So they're profitable, not by a ton, but they do contribute, and that's the important thing.

[Operator]

We have a question regarding revenue and cost base. At the statutory level, revenue grew by 14%, while operating expenses increased 11%. Do you feel that the current cost base is sufficient to drive ongoing growth? Or will further investment be required?

[Shaun Di Gregorio, executive]

Well, I think as I've said before, our focus is revenue growth. And you've got to walk a fine balance between growing revenue, investing in product and scaling and managing your cost base. And I think if we continue to grow revenue faster than cost, then margin grows. And the question is -- so there's -- it all ends at this sort of spectrum, are you investing enough to grow fast enough, but you've got to grow profitably, and that's the path we're treading. So we're absolutely focused on revenue growth.

You could double your OpEx tomorrow in fantasy land and then you grow faster. But we're trying to get the mix right. And I guess it's -- that's the art of running these businesses. We'd love to run them even leaner. But we've got to sort of trade a little bit off against getting meaningful revenue growth, and We think that there's lots of upside still to happen. But at the same time, these businesses are now starting to demonstrate their ability to generate EBITDA.

So I don't want that answer to sound evasive, it's not, but it's just not so black and white either. So it's actually revenue growth, keeping costs under control. You want to offer it responsibly, which I think has been a requirement over the last 18 months, given the cost of capital, given the volatility in markets, given inflation, given interest rates, people looking for responsible businesses that grow and generate EBITDA.

And we've turned that corner sometime back, and we're on this revenue growth, margin growth. We want to grow revenue faster. We want to have better margin, and that's what we're really focused on. To do that, you've got to invest it in. I just wish there was a really crisp straightforward answer to that, and it's very much a managed task as we move from quarter to half.

[Operator]

Do you feel that FDV is sufficiently capitalized to drive growth over the next 12 months?

[Shaun Di Gregorio, executive]

Well, we have enough money in the bank, if that's the question. If the inference is, if you had more capital, would you grow faster? The answer is probably, but you've got to trade that off against running businesses responsibly, scaling good product and delivering strong results for investors, and that's what we're trying to do.

I don't feel capital constrained. Arguably, if interest rates were 1% and inflation was 1%, then the capital markets would be far less constrained, and you'd probably be more bullish and more active in looking at more M&A and looking at more product investment. But that's just not the world in which we live, so we're trying to behave responsibly. We're trying to grow revenue. We're trying to grow margin while the capital markets are tight.

And we're doing that, and our regions are cash flow positive. So we think at a headline level, these are pretty good outcomes. If I just defer to the page that's on the screen in terms of the growth in margin and growth in revenue and, yes, if you had more capital, sure. But this is kind of the age-old question for any business. But at the end of the day, we're trying to walk a very defined path, which we have communicated long and loud around our priorities, and we're doing that.

And as proof of our sustainability on this path continues, I'm sure our cash will continue to accumulate and we'll maybe be less cash constrained and that will feed growth. So it's a delicate balance to manage at the moment. But we think we're navigating that pretty well, and it is the world in which we live.

[Operator]

How should investors be thinking about the second half of 2024 in terms of growth and profitability for FDV?

[Shaun Di Gregorio, executive]

Well, I mean, you can go back -- I think here's a good way to think about it, draw a line. But we -- like I said, we're focused on growth, and we don't provide forward guidance. We don't say if you're going to say we're going to grow X percent or 1%, but our whole business is around revenue growth and margin growth. So we want to grow and we want to grow our margin.

To the extent that we provide forward guidance, we don't really ever had. What we have said is here's the performance over time. If you look at the EBITDA blip in '21, that's when we acquired some more businesses. So we've reduced our losses. We've grown our revenue. We bought some more businesses, which grow our revenue, then we reduced our losses again and we're back to profitability.

So we've got a fairly good track record in terms of, I guess, a relatively small-cap business in emerging markets running a model that is well known, but adventurous in some senses. So yes, so if you look at the trajectory, that's the best way to think about the second half of the year.

[Operator]

That was all for the question and answers for today. I'll now hand it over back to you for some closing remarks.

[Shaun Di Gregorio, executive]

Well, I would just sort of point out to 2 things. Our results, which is what we're here to talk about so we get pretty crystal clear, I think in environments which have been tough, we've achieved results that other companies haven't in the industry in which we operate and the markets in which we operate. So I'd remind people at that, that we're profitable, that we've got cash and we're growing our revenues.

I'd sort of go back and we've always had a really strong, I guess, sense of accountability in our business, and this is what we said, these are the priorities we laid out. So reporting back on those very specific priorities that we laid out at the beginning of the year and how we're progressing, and we continue to be really focused on the first 3 that are on the screen, but the fourth one, which is about value for investors, and I'm the largest shareholder of a business that's performing really well that we think is undervalued.

So if you look at some of the transactions that have occurred out in the market, it's starting to get bullish again. So I encourage people to look at the results we're achieving, the potential that we've got and the size of the markets we're in and the new products that we're rolling out and how to think about the value that we're delivering. And that will probably be the 2 areas of real focus and emphasis I'd encourage people to think about when they think about FDV.

[Operator]

That concludes our conference for today. Thank you to everyone for participating, and you may now disconnect from the call.

[Shaun Di Gregorio, executive]

Thanks, Jerry.

[Operator]

Thanks, Shaun.